The Rise of the Internet and the End of Microsoft?

The story of how Microsoft reacted to the Internet phenomenon illustrates the way Gates empowers workers by encouraging communication at every level of the hierarchy—and thereby derives great benefit. Had Gates taken a different tack, Microsoft might have become a very different company. The story begins in the mid-1990s. While some companies were gearing up for the Internet in a big way, at that time Microsoft was a laggard. By the fall of 1995, Microsoft—long accustomed to the status of media darling—was being derided for not responding to the Internet quickly or effectively enough.

In retrospect, Gates readily admits that he simply missed the boat at first. Within a few years, however, Microsoft had reversed course in dramatic fashion. The company acquired or made investments in dozens of Web-based companies, and went from a company without an Internet strategy to a company obsessed with the power of this new technology:

If we go out of business, it won't be because we're not focused on the Internet. It'll be because we're too focused on the Internet.

In other words, once the software giant grasped the importance of the Internet, it responded with urgency. So how did a huge company like Microsoft go from "not getting it" to being one of the key players in the industry? For one thing, Gates listened to employees who had their ears closer to the street than he did, and were hearing the new ideas that he was not hearing.